Colorado’s economy, on the surface, is humming along with unemployment rates at historic lows and some of the strongest job gains in the country.
But a closer look shows that median hourly wages are stuck; many of the new jobs being added are low-paying; and thousands of working-age adults remain disengaged from the labor force, according to the State of Working Colorado report from the Colorado Center on Law and Policy.
“We have another year of strong job growth in the state and unemployment continues to drop. But the indicator of how the economy is performing for the majority of workers — wages — still isn’t moving,” said Michelle Webster, manager of research and policy analysis with the group, which advocates on behalf of low-wage workers.
In 2016, the median hourly wage in Colorado was $18.92, which is below the inflation-adjusted median wage of $19.70 in 2007 and 2 percent below the median wage in 2000, after adjusting for inflation. The national median hourly wage is $17.80.
Higher-wage workers have seen pay increases, but not robust ones. The top 20 percent of wage earners have seen their pay rise 6.3 percent since 2000, while wages for the top 10 percent of earners are up 12.2 percent.
Median household incomes in Colorado are on the rise. They increased 1.5 percent from 2015 to 2016 to $65,686. But, given that median hourly wages did not rise, Webster said people may be working more hours or households may have more workers, which happens when adult children stay with their parents to help cover the bills.
The report is based on 2016 numbers, before a voter-approved hike in the minimum hourly wage from $8.31 to $12 by 2020 took effect.
The state’s minimum hourly wage rose to $9.30 at the start of this year and will rise to $10.20 in 2018, which should push up median wages this year and next.
Ryan Gedney, a senior labor economist with the Colorado Department of Labor and Employment, said in the past four or five months, the state’s median hourly wage has shown increases in the 3-percent to 4-percent range year-over-year.
He said the mix of jobs added since the recession and the changing composition of workers in the labor force can help explain why median wages haven’t risen more despite falling unemployment.
Baby boomers at the top of the wage scale are retiring in larger numbers. Millennials — people in their 20s and early 30s — are now the largest demographic group and are coming into the labor force in large numbers. But as newer entrants, they have lower earning power than those retiring.
The mix of jobs being added also is at play. Service industries such as leisure and hospitality and health care have accounted for some of the largest number of new hires. If lower-paying jobs are a bigger part of the mix of jobs being created, then that can keep a cap on median wages.
Between the higher minimum wage and tight labor markets, Webster said she wouldn’t be surprised if next year’s report shows a rise in the median hourly wage in Colorado.
But the gains are long delayed and nowhere near enough to keep up with rising living costs. In 2001, only 9 percent of jobs in the northern Front Range did not pay enough for a single adult to cover basic livings costs, she said. Last year, one in five jobs fits that description.
In the food service industry, 40 percent of jobs in 2001 did not pay enough for a worker to be self-sufficient financially. Last year, 70 percent of the jobs in food service could not cover basic living costs, she said.
The gap between earning power and living costs, especially housing, is something policymakers in Colorado need to address, Webster said.
Karlee Hemphill and her husband moved from Atlanta to Denver in 2013, and they found they could not find a house that was affordable for their growing family when they decided they needed something beyond an apartment.
When her employer offered her a 35 percent raise this summer to move to Virginia, she jumped.
“Same company, same position. This was strictly a cost-of-living raise, and we were able to buy a nicer, bigger house for a lot less than what we found in the Denver area.” she said.
Hemphill, who manages apartment communities for a living, said she saw rents in metro Denver increase 13 percent between 2015 and 2016.
“I know my residents’ median income did not increase nearly that amount in one year,” she said.
Webster also notes that the share of adults between the ages of 25 and 54 who are in the labor force has risen slowly this decade, but it still remains below the prerecession peak seen in Colorado.
That stubborn lack of participation could reflect more people having to stay home to take care of children or aging parents or a skills mismatch. Engaging those sidelined workers is another area where policymakers could help out, she said.
